Articles Posted in Breach of Contract

The issue in this case was whether there was a material breach under Illinois contract law as to American Guardian Holdings or AGH. AGH claimed it was excused from having to pay the final installments totaling $11 million for Steven Freedman’s shares in AGH because it was alleged that Freedman breached restrictive covenants in a settlement agreement.

When AGH agreed to redeem Freedman’s shares in AGH, it insisted on non-competition, non-solicitation and non-interference covenants to block Freedman, his son Max and any of their businesses from competing against AGH in selling “vehicle service contracts” or “extended warranties” through auto dealers.

Freedman’s other businesses included a brokerage that provided policies to owners of recreational vehicles, plus a personal-and-commercial-lines insurance agency called American Integrity Insurance Solutions, or AIIS, which was run by Freedman’s son, Max.

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The Illinois Appellate Court has reversed and remanded the decision dismissing the lawsuit brought by Advantage Marketing Group Inc. James P. Keane Sr. was one of the founders of Advantage Marketing Group Inc. Keane maintained a 35% shareholder stake in the company.  Keane had formally served as a director, officer and employee at Advantage Marketing.

Despite not being a company officer for the past several years, Keane repeatedly held himself as an owner and received the same bonus as Patty Hermann, the majority shareholder director at Advantage Marketing, and was a “principle employee . . . with wide-ranging responsibilities equivalent to those of an officer.”

Keane had developed and maintained Advantage Marketing’s natural records and explored strategic acquisitions, buying up competing businesses.

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Union Tank Car Co. relied on business records of third parties without any testimony from employees of those other companies to quantify damages caused by a breach of lease for 47 railcars.

An appeal was taken to the Illinois Appellate Court from a $1.27 million judgment entered in a Cook County bench trial. NuDevco Partners guaranteed the lease and argued that the trial court was wrong in ruling that Union Tank satisfied the requirement for the business records exception to the hearsay rule. NuDevco also claimed that the best-evidence-rule barred testimony about Union Tank’s wire transfers in payments to third parties.

The tankers were for shipping petroleum. The lessee, a subsidiary company of NuDevco, stopped paying rent and shipped the tankers back to Union Tank. To prove up freight, switching and storing charges, Union Tank presented invoices from its vendors, plus testimony from its director of fleet repair and the general manager of the lease division about receipts and payment of the bills.

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Daniel and Rachel Brenner purchased four works of art from Evelyn Statsinger in the 1950s and 1960s. The artworks were displayed in the Brenner home continuously through the time of Daniel’s death in 1977 and Rachel’s death in 1990. The Brenner children, Ariel and Jonathan Brenner, inherited the artwork.

When Jonathan died in 2010, he died without a will. His widow, Terry Brenner, was his sole heir.

The paintings were given back to Evelyn Statsinger in 1996. The transfer took place with Jonathan, Terry, their daughter, Statsinger and Statsinger’s husband being present.

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Noncompete agreements have always been controversial for the way they intend to or unintentionally restrict employees from gaining employment after leaving a job where a noncompete agreement was signed. In 2017, the Illinois General Assembly addressed concerns about noncompete clauses found in low-wage employees. Effective January 2017, the Illinois Right to Work Act prohibits private-sector employers from entering into noncompete agreements with low-wage employees, rendering such agreements facially illegal and void.

This Illinois law is similar to other states that have passed legislation that also limits the employer’s ability to restrict low-wage employees in noncompete contracts in the private-sector.

For example, in the last couple of years, Alabama, Hawaii, New Mexico, Nevada, Oregon, Utah and Washington have passed laws that restrict the enforceability of noncompete agreements. Other states, including New Jersey and Pennsylvania, have proposed legislation that mirrors restrictions in enforceability of noncompete agreements.

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A breach of lease case resulted in a $278,198 default judgment, which was Count II of a Complaint brought by A.L. Dougherty Real Estate and Phyllis K. Dougherty. The complaint was filed against Cube Global LLC and March Fasteners Inc.  The complaint alleged that Cube Global was liable as March’s alter ego.

A bench trial was held.  The plaintiff presented evidence that Cube Global, which was incorporated while the lease case was pending, wound up with all of March Fastener’s assets and customers.

With the underlying decree boosted by fees, costs and interest, the judgment against Cube Global was $676,222. The judgment was against Su Chin Tsai, whose 16-year-old daughter was listed as Cube’s incorporator, and it totaled $435,584.

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Doug Miller owned two companies in Indiana:  E.T. Products, which blended and sold fuel-additive products, and Petroleum Solutions, which blended and sold lubricant products.

Petroleum Solutions also supplied a few customers with fuel additives from E.T. Products.

In January 2011, a group of investors led by Tom Blakemore purchased E.T. Products. As part of the sale, Miller and his son, Tracy, signed essentially identical non-competition agreements.

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The 1st District Appellate Court has reversed in part, vacated in part and remanded a decision by a Cook County judge in a case involving the use of trust money and investments.

Arie Zweig was the trustee of the Arie Zweig Self Declaration of Trust dated June 28, 1990. He used $2 million from the trust for an equity investment in a partnership supporting an ambulatory surgical center called Bedford Med. Bedford Med was operated by Bedford Med LLC. He said he was induced to invest by Nadar Bozorgi, Mandan Garahati and Guita Bozorgi Griffiths, acting as the Bozorgi Limited Partnership.

Zweig claimed that the Bozorgi defendants represented to him that the value of the Bedford Med operation was appraised at $21 million and that permanent financing had been secured. Zweig also claimed that the Bozorgi defendants maintained that they invested more than $5 million in the project, that the real estate had been already leased or was about to be finalized and that the investment would be used as equity and for working capital, generating an annual profit of 15-20%.

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Generally the law in Illinois states that a guarantor is entitled to assert the same defenses that would be available to the principal obligor. W.W. Merck White Lead Co. v. McGahey, 159 Ill.App. 418 (1st Dist. 1911).

“Under Illinois law, ‘the liability of a guarantor is limited by and is no greater than that of the principal debtor and . . . if no recovery could be had against the principal debtor, the guarantor would also be absolved of liability.’ ‘Although the language of a guaranty agreement ultimately determines a specific guarantor’s liability, the general rule is that discharge, satisfaction or extinction of the principal obligation also ends the liability of the guarantor.’” Riley Acquisitions v. Drexler, 408 Ill.App.3d 392, 402 (1st Dist. 2011), quoting Edens Plaza Bank v. Demos, 277 Ill.App.3d 207, 209 (1st Dist. 1995).

In the Riley case, the guarantors were two joint obligations to the bank. The bank released one of the obligors. The other obligor was a dissolved corporation. Under the applicable state law, the five-year post-dissolution time period for collecting against the dissolved corporation had expired.

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On Oct. 28, 2013, Robert Skahill signed a contract with Metropolitan Properties & Development Inc. The contract called for him to buy the property from Metropolitan for $3.1 million.

Skahill was required to put down $50,000 as earnest money of which $5,000 was due on the signing of the contract and the remaining $45,000 to be paid following the Nov. 18 inspection.

He Skahill paid $5,000, but never paid the remaining $45,000 in earnest money.

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